“The ECB should not issue public ratings to be used for regulatory purposes,” runs the response to an idea from the Commission. And the jury is also out on a publicly-funded agency other than the ECB issuing ratings.

Questions of independence are behind the ECB’s ratings reluctance. While the central bank does undertake in-house credit assessments, “the conduct of rating activity as in-house credit rating assessments always raised questions regarding reputation risks and potential conflicts of interest, beside other risks,” says the report.

As for an alternative, publicly-funded, body running the ratings, questions remain over independence and competition. “The degree of independence of such an agency funded wholly or partially by public money remains to be assessed,” says the report.  Aside from manpower and data requirements, it is also unclear whether “the creation of a semi-public agency would result in increasing competition, or rather create artificial barriers to entry for new private entities and therefore ultimately reduce competition”.

The spirit of the proposal was accepted, however, and the idea itself was not entirely scotched. Read more